Disadvantages of Using ROI for Performance Measurement:
{"Image DocumentName": "Disadvantages of Using ROI for Performance Measurement:", "Image ImageDescription": "The biggest problem with using ROI alone to evaluate managers is this: If the expected ROI of a new project under consideration is lower than the division\u2019s present ROI but higher than the target rate, the manager may reject a profitable project because it would lower the division\u2019s overall ROI, even though the project would be beneficial for the company. The problem with ROI is that it measures return as a percentage rather than as a dollar amount. While it is good to have a higher rate of return, the company is ultimately interested in the amount of the return, and any project with a return higher than the required rate of return will increase the company\u2019s net profit, even though it may reduce that division\u2019s ROI, if the division\u2019s current ROI is higher than the expected ROI of the new project. As a result of this shortcoming, ROI is often used together with other measurement tools.", "Image XResolution": "37", "Image YResolution": "37", "Image ResolutionUnit": "Pixels/Centimeter", "Image Software": "SlidePlayer", "Image YCbCrPositioning": "Centered"}